Finance (No. 2) Bill

Mr Speaker:
I inform the House that I have selected the reasoned amendment in the name of the Leader of the Opposition.

1.36 pm

The Chief Secretary to the Treasury (Danny Alexander):
I beg to move, That the Bill be now read a Second time.

The Bill is certainly substantial—602 pages, 295 clauses and 34 schedules—but it is packed with measures that will help British businesses invest and create jobs, help British households work and save, and help ensure that everyone in Britain pays their fair share of tax. It takes forward the Government’s long-term plan to create a fair, competitive and transparent tax system that is enforced effectively, in stark contrast to the uncompetitive and leaky regime that we inherited from the Labour party.

I will begin by talking about the measures that boost growth and investment, deal with those that cover avoidance and aggressive tax planning, consider those that help working people and savers, and finally come to pensioners.

Mr Kevan Jones (North Durham) (Lab):
Will the Chief Secretary tell the House at what point in the last Parliament he, as a Liberal Democrat, objected to the Labour Government’s spending targets?

Danny Alexander:
I cannot put a time and date to it, but I recall several occasions when I and my Front-Bench colleagues, particularly my right hon. Friend the Member for Twickenham (Vince Cable), objected to the Labour party’s plans. Labour Front Benchers, when they were in government, ignored warnings from the Liberal Democrat Benches for a number of years before the financial crisis, and that led, to a considerable extent, to the mess that was made of the economy when the Labour Government finally saw what was coming.

Mr Jones:
The right hon. Gentleman obviously has a problem with his memory. Let me help him. Will he name a policy area—for example, health or local government —on which the Liberal Democrats said we should spend less money?

Danny Alexander:
I am tempted to say that we are wandering slightly from the Bill. I can draw the hon. Gentleman’s attention to several measures in the 2010 Liberal Democrat manifesto that proposed reining in excessive expenditure by the Labour Government.

I note that Labour Members have tabled a so-called reasoned amendment. I point out that we are investing in new technology and new energy sources because of the Labour Government’s failure to tackle rising energy bills; because of their failure to get young people into work, we have created the conditions for more than 1.5 million new jobs in the private sector; because of their failure to boost housing supply, we have had to cut back hundreds of pages of planning laws, and because of their failure to help families with child care costs, we have taken bold steps to introduce tax-free child care. In short, because of Labour’s failure to create jobs and growth and build homes, the British public asked the

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coalition to clear up the mess. The Bill takes further steps to do that. A Labour party that stands in its way is a blockage on the road to recovery.

Pete Wishart (Perth and North Perthshire) (SNP):
The Chief Secretary to the Treasury will of course be grateful to Labour for voting with his Government on the welfare cap. Was he as surprised at that as I was, however, given that he will have observed what happened in Perth, with all those weekend socialists proclaiming their commitment to the left-wing cause, only to come down here and vote with the Tories?

Danny Alexander:
The hon. Gentleman is wilfully misinterpreting what the welfare cap is about. If he had listened to my speech summing up the debate on the welfare cap last week, he would have discovered that the cap was a means of ensuring transparency and accountability to the House in relation to increases in welfare expenditure. In the past, welfare increases were smuggled through the forecasts without proper transparency and scrutiny. The reforms will ensure that, when expenditure is forecast to breach the cap, the Minister responsible will have to come to the House and explain why the breach is happening and what he or she intends to do about it. That could include introducing measures to reduce expenditure; it could also include an increase in the cap, if that is regarded desirable. Given that the hon. Gentleman’s party seems to believe that, under independence, it would be possible for taxes to fall and for expenditure to rise without the chickens coming home to roost, it is not surprising that it should oppose measures to increase accountability to this House on expenditure. The result of the vote last week showed, however, that the House as a whole welcomes the opportunity to hold the Government to greater account for expenditure increases in that area.

Guy Opperman (Hexham) (Con):
My right hon. Friend has set out some of the policies in the Budget, but he has not yet mentioned the school funding reform that was introduced before the Budget by the Minister for Schools, my right hon. Friend the Member for Yeovil (Mr Laws) and which will be implemented by the Finance Bill. Does the Chief Secretary to the Treasury agree that those changes, brought about as a result of the F40 fairer funding campaign, will have a seismic effect in many counties up and down the country?

Danny Alexander:
The measures that my right hon. Friend the Schools Minister has introduced are not actually in the Finance Bill, and I hope that their impact will not be seismic in the literal sense, but I agree with my hon. Friend that they will make a serious difference to schools in his area and in other historically underfunded areas of England that have been campaigning for a long time for a fairer level of funding in their schools. I am glad to hear that my hon. Friend welcomes those measures.

Charlie Elphicke (Dover) (Con):
Are not the most important aspects of the Bill the things that it will do for the least well-off? The previous Government abolished the 10p tax rate, resulting in the least well-off paying higher taxes. Is it not right that this Government are helping those people?

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Danny Alexander:
I could not agree more with my hon. Friend, and I shall come to those points later. He is absolutely right to say that measures in the Bill will ensure a degree of fairness.

Let me begin by describing the measures that will aid growth and investment. Hon. Members will be well aware that the economic recovery is taking hold. Jobs are up, the deficit is down, the economy is growing and, as we have seen from this morning’s figures, productivity is improving. This growth has come about because of the nous and the hard work of businesses and individuals in every part of the United Kingdom. We have done our best, over our four years in office, to create the right tax environment to support their work by reducing the level of corporation tax, bringing rates for large and small firms down to 20%, and at the same time offering generous reliefs for R and D-intensive firms and the creative sector. Our reliefs for the film, high-end television and video games sectors are among the most generous in the world, and the critical and commercial success this year of movies such as “Gravity” shows that these reliefs really have taken off.

We know that all the changes we have made across our tax system have been responsible for companies locating their operations here, and for companies expanding their operations here, but we also know that there is still a long way to go. The Bill tackles some of the challenges facing our business community and our economy. We recognise that British businesses are still not investing enough, and that it is only by increasing business investment and productivity that we can embed a long-term recovery that benefits everyone. Let me put that point into perspective. If businesses had increased investment by just 10% in 2012, the level of GDP in this country would be £12 billion higher today. That is why we need to use our tax system to encourage further investment now. The Bill will therefore raise the annual investment allowance to £500,000, with effect from this month.

James Morris (Halesowen and Rowley Regis) (Con):
Will not the doubling of the investment allowance have a specific benefit for manufacturing companies outside London and the south-east, particularly in areas such as the west midlands and the black country, where manufacturers’ order books are full and those companies are seeking to invest in new plant and machinery?

Danny Alexander:
As usual, my hon. Friend is absolutely right. In particular, the measure will help small and medium-sized manufacturers outside London; they are the backbone of our economy.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC):
Will the Chief Secretary to the Treasury tell the House where the UK lies in the global league of business investment as a percentage of GDP?

Danny Alexander:
I do not have those figures immediately to hand, but I can tell the hon. Gentleman that, according to recent indices from major international firms, the UK is seen to be in the top two or three countries in the world for companies to invest in. One of the accountancy firms recently published an index showing that the environment for investment in the UK was now among the top half dozen in the world. Our position has improved significantly in recent years.

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Mr Andrew Love (Edmonton) (Lab/Co-op) rose—

Mr William Bain (Glasgow North East) (Lab) rose—

Sheila Gilmore (Edinburgh East) (Lab) rose—

Danny Alexander:
I am going to make some progress. I will give way again later.

The measures relating to the annual investment allowance will mean that 99.8% of firms—almost 5 million businesses —will receive 100% relief on their qualifying investments. The Bill also provides a much-needed boost for our manufacturing sector by placing a cap on the carbon price support rate. That measure will cut energy bills for businesses and deliver around £4 billion in savings by 2018-19 without undermining investment in renewables in any way.

However, if we want to build a resilient economy with a broad base of industries that is fit to withstand isolated shocks, we have to provide support across our sectors. That includes supporting those innovative small businesses that could be the big global brands of the future. That is why the Bill further increases the generosity of the R and D tax relief for small businesses. From today, the payable credit for loss-making SMEs will rise from 11% to 14.5%. The Bill will also support investment in the high-growth-potential companies that need it most. The seed enterprise investment scheme, which has already helped more than 1,600 companies to raise over £135 million of investment, will be made permanent. The capital gains tax reinvestment relief will also be made a permanent feature of the scheme.

Sheila Gilmore:
Will the Chief Secretary to the Treasury explain why his Government and his Chancellor decided, on first coming into office, to cut investment allowances, saying that they were not a good way of encouraging investment?

Danny Alexander:
It was because our first priority in business taxation was to bring down the very high, internationally uncompetitive headline rate of corporation tax. It was 28% when we came to office, and it will come down to 21% this year and 20% next year. We also chose to reverse the Labour Government’s planned increase in the small firms rate of corporation tax from 21% to 22%. Instead, we took it down to 20%. Those were the right priorities at the start of this Parliament, but given the present encouraging environment for investment, it is now important for the Government to put in place incentives to bring some of that investment forward.

Chris Leslie (Nottingham East) (Lab/Co-op):
My hon. Friend the Member for Edinburgh East (Sheila Gilmore) has made a pertinent point. The Government brought down investment allowances from, I think, £100,000 to £25,000—a significant reduction, which kicked in from April 2012. With hindsight, will the Chief Secretary to the Treasury admit that that was a mistake?

Danny Alexander:
No.

The Bill also recognises that social enterprises have a role to play not only in growing the economy but in rebalancing the economy and in reforming public services. At present, public services are often ineligible for existing

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reliefs. The Bill introduces a new tax relief for investment in social enterprises at a rate of 30%, the same as for existing venture capital schemes. I believe that this will unlock up to £500 million of additional investment in social enterprises over the next five years. I hope that Members on both sides of the House will welcome that.

Mr Don Foster (Bath) (LD):
They voted against it.

Danny Alexander:
I am told from a sedentary position that the Opposition voted against that measure. They voted against the whole Finance Bill, of course.

The Bill also introduces three new tax reliefs to support employee ownership. The Deputy Prime Minister has rightly given a high priority to employee ownership, and the measures in clause 238 will introduce a capital gains tax relief, an inheritance tax relief and an income tax exemption for employee-owned companies. This will make the sale of a business into an employee ownership structure much more attractive. It will give employees of indirectly employee-owned companies an income tax relief of £3,600 a year on their bonuses. That will help to encourage more firms to become employee-owned in the years to come and, therefore, to improve the structure of our economy.

It is also worth reminding hon. Members of some of the other measures this Bill introduces that will support specific UK industries: it legislates to reform the banding of air passenger duty; and it includes a measure that will help make the Glasgow athletics grand prix a success this summer, putting in place a tax relief for athletes competing in that competition, which is an immediate predecessor to the Commonwealth games. Having tax reliefs for both the Glasgow grand prix and the Commonwealth games will help to ensure, as the UK Government rightly should be ensuring, that the world’s best athletes are encouraged to come to compete in the Glasgow 2014 Commonwealth games. Everyone, in all parts of this House, hopes they will be an enormous success for Scotland and for the whole UK.

The Bill also includes a package of measures to support oil and gas exploration in the UK continental shelf; it introduces a new allowance to support early-stage investment in shale gas; and it reduces the tax on beer by a penny a pint and freezes the duty on spirits, rightly offering particular support to the Scotch whisky industry, as Scotch is one of this country’s most successful exports. Those measures will support not only our pubs, but brewers and so on. All those measures, taken together, cut the costs for business, support innovation, boost exports and show that this Bill will help British businesses to help the British economy grow.

Mr Alan Reid (Argyll and Bute) (LD):
I wish to congratulate my right hon. Friend on including in the Budget a measure that will help voluntary groups that support the rescue boats on Loch Lomond and Loch Awe. Removing the VAT that such groups have to pay on fuel is a big help to them.

Danny Alexander:
I am grateful to my hon. Friend for his comments. The House should note that he drew these matters to my attention in the preparation of the Budget, and he has campaigned assiduously to ensure that those important bodies are treated similarly to other emergency services in that respect.

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Having set such competitive tax rates—rates designed specifically to support businesses—everyone in this House rightly expects those taxes to be paid, and this Bill continues the Government’s firm action against the persistent minority who continue to seek out unacceptable ways to reduce or delay paying the taxes they owe. We are tackling avoidance by large businesses by taking action in this Bill to close down avoidance schemes involving the transfer of profits among group companies and closing a number of other loopholes.

Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op):
I am interested to hear the right hon. Gentleman talking about tax avoidance. How much of the amount the Chancellor claimed would be raised from the deal with Switzerland was actually recovered by the UK?

Danny Alexander:
We anticipate that that deal will bring in about £1.7 billion. That is less than was originally forecast but it is a great deal more than would have happened had we continued the previous Government’s position of not having any such deal in place. I draw the hon. Gentleman’s attention to the many other Labour tax loopholes this Government have closed. I particularly draw his attention to measures on partnerships, where the revenues expected now far exceed those originally forecast. I draw his attention to the measures on disguised remuneration, which his party voted against in this House, disgracefully trying to allow people to continue to disguise loans as remuneration—his party should be ashamed of that. I draw his attention to the annual tax on envelope dwellings, a measure this Government have introduced to ensure that people who seek to own properties through companies pay a proper amount of tax. That measure is raising five times more than was originally forecast. So I will take no lessons from him or any other Labour Member on tackling avoidance and evasion.

Mr John Leech (Manchester, Withington) (LD):
I am glad my right hon. Friend is dispelling the myths perpetuated by the Labour party on tax avoidance. This Government have done more in their four years than was done in the 13 years of the previous Labour Government to tackle tax avoidance, and I encourage him to go further.

Danny Alexander:
I am grateful to my hon. Friend for his comments, and he is absolutely right. The tax system we inherited was, as with so many other parts of the previous Government’s economic strategy, full of holes and leaking revenues all over the place. The Labour party had spent all its time on a prawn cocktail offensive in the City, sucking up to the banks, rather than concentrating on making sure that everyone in this country paid the proper amount of tax. As a result of action we are taking, we are raising—so far—an extra £60 billion in this Parliament, and before the election we expect tens of billions more to be raised in revenue that would not have been raised had we accepted the Swiss cheese that Labour left us.

Charlie Elphicke:
May I support my right hon. Friend in taking no lessons from the Labour party, which, when in government, was too often the tax avoider’s friend? It allowed a culture of industrial-scale tax avoidance to come into existence, and tax revenues were depleted by its neglect of the system.

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Danny Alexander:
My hon. Friend makes his point eloquently and accurately. I do not wish to add anything to it, but neither would I subtract a single word, as he is absolutely right.

Julie Hilling (Bolton West) (Lab) rose—

Danny Alexander:
I will give way one more time and then I will set out some of the measures we are taking, which the previous Government had 13 years to introduce but failed to do so.

Julie Hilling:
Why were there fewer confiscation orders—raising less money—in 2013 than in 2012? Why did the Government have to reduce the top rate of tax because people were avoiding paying it if they had been so wonderful at closing all these loopholes?

Danny Alexander:
The hon. Lady might well ask her own Front-Bench team why they increased the top rate of tax for their last few days in office, given that it was clear that it was not going to raise the money it supposedly would have raised. We have made sure that the wealthiest in this country are paying a far greater share of income tax than they did in any year under the previous Government—[Interruption.] Let me respond to her point before she seeks to come back on it; I listened to what she said, so she can listen to what I have to say. Measures in that Budget raised five times more from the same group of people. The analysis from Her Majesty’s Revenue and Customs showed that this tax was not raising any money, and I would prefer to have the substance of actually raising revenue from people than the pretence of measures that do not raise any money.

Julie Hilling:
Not only has the right hon. Gentleman not answered the question about loopholes, but the truth is that during that short period when the full tax was in place it raised, and was raising, much more money than has been the case since it was reduced. The Government do not like to look at what happened during that one full year of the tax being in place.

Danny Alexander:
I encourage the hon. Lady to read the detailed analysis published by HMRC more than a year ago.

Let me deal with some of the measures to tackle—

Stephen Doughty rose—

Danny Alexander:
I have given way to the hon. Gentleman previously, so I am going to make some progress.

This Finance Bill also tackles avoidance by wealthy individuals by preventing high-earning, non-domiciled individuals from using dual employment contracts artificially to reduce their UK tax liability. We are tackling the avoidance of employment taxes by taking action to prevent offshore and onshore employment intermediaries from avoiding their obligations. We are tackling the avoidance of taxes on residential property through the use of corporate envelopes by creating new bands for the annual tax on enveloped dwellings and extending the related stamp duty land tax and capital gains tax charges. In addition, the Bill also creates a new requirement that users of avoidance schemes which have been defeated in another party’s litigation, or which fall within the scope of the disclosure of tax

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avoidance scheme rules or the general anti-abuse rule, which this Government have introduced, should pay the disputed tax up front. That will bring forward almost £5 billion of revenue over the next five years and will ensure that those who knowingly enter avoidance schemes cannot hold on to the disputed tax but have to pay up front, like all other taxpayers. Those actions will radically reduce both the incentives and the opportunity for individuals and businesses to engage in abusive behaviour.

Let me now deal with the ways in which this Finance Bill will help people in work. This Government have an incredibly proud record of reducing tax for the lowest paid. Not only are we delivering our coalition commitment to raise the income tax personal allowance to £10,000 this week, but we are going further. This Finance Bill legislates to set the personal allowance at £10,500 in 2015-16. I never tire of telling the House that that policy has travelled from the front page of the Liberal Democrat election manifesto to the pockets of tens of millions of people, in all parts of the UK.

Mr Love:
Some 17% of taxpayers earn less than the minimum £10,500 that the Minister mentioned. What are the Government doing about them? If we really are all in this together, do they not need to focus some attention on the least well-paid?

Danny Alexander:
That is an important question. The measures to lift the personal allowance, from a little over £6,500 when we came into office to £10,500 as it will be in April next year, will mean that about 3 million people in this country—most of the people to whom he refers—are lifted out of paying income tax altogether. That is a serious benefit to those individuals. It also helps to improve incentives to work and to progress in work in this country and bears some responsibility for the stronger employment performance that we have seen in recent years.

Mr Bain:
On that point, the Chief Secretary to the Treasury has omitted to mention thus far that the Government will freeze the work allowance in universal credit for the next three years. That means that a person on a low income will not benefit in full from the rise in the personal allowance. Is it not the case that he is giving with one hand and taking with the other?

Danny Alexander:
The way that universal credit is structured means not only that we have a much simpler system, but that most people in the benefits and tax credits system will keep more of their additional earnings as they progress in work than they would have done under the extremely complicated, confusing system that we inherited from the hon. Gentleman’s party. The work incentive clearly has a positive effect overall.

Mr Kevan Jones rose—

Danny Alexander:
I will give way one more time, and then I will make some progress.

Mr Jones:
The Chief Secretary to the Treasury says that he is proud that the idea of an increase in personal allowance came from the front page of the Liberal Democrat manifesto. Will he explain why his party, which campaigned on not increasing VAT, increased VAT when it entered the coalition, affecting some of the lowest and most poorly paid people in this country?

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Danny Alexander:
I am glad that the hon. Gentleman gives me an opportunity to repeat the fact that this policy came from the front page of the Liberal Democrat election manifesto, and I welcome his confirmation of that point. He should recognise that the coalition Government came together to sort out the catastrophic economic mess that was made by his party in the previous few years. When we came into office, we were borrowing £150 billion a year—for every £4 we were spending under his party, £1 had to be borrowed—[Interruption.] I draw his attention, if he is interested, to the distributional analysis of fiscal consolidation that was published alongside the Budget this year, which shows that the wealthiest in this country have made the largest contribution to the fiscal consolidation.

Mr Jones rose—

Danny Alexander:
I will not give way, because I want to make progress. The increase in the personal allowance will mean that a typical basic rate taxpayer will pay more than £800 less income tax per year than in 2010-11. That is real action to support the millions of people on low and middle incomes. It helps them to keep more of what they earn and rewards those who want to work hard. This Government and this Bill also recognise that people who rely on their savings income have been hit particularly hard by low returns in recent years. It is for that reason that we are cutting tax on savings for the lowest earners. From April 2015, the 10p starting rate of tax on savings will be abolished and a 0% rate will be extended to the first £5,000 of savings income above the personal allowance. That will benefit 1.5 million people with low earnings from some savings, and more than 1 million people will no longer pay any tax on their savings income at all.

It is no exaggeration to say that this Government have achieved sweeping reforms on pensions. Under the excellent leadership of my Liberal Democrat colleague, the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), our simplifications and reforms of the pensions sector will be one of this Government’s most enduring legacies. Automatic enrolment will see nearly 6 million people enrolled in workplace pension schemes by the end of this Parliament. The single-tier pension will provide millions of individuals with a firm foundation to support their saving, and it will particularly benefit those groups that, under the current system, have tended to build up low amounts of savings. I am talking about women with broken work records, the low paid and the self-employed. The triple lock has helped to protect the most vulnerable members of our society, and the recent Budget announcements provide us with the final thread of this coalition’s web of pension reforms.

From April 2015 we will allow individuals much greater choice about how they access their defined contribution pension savings. Individuals will be able to access their defined contribution as they wish, subject to their marginal tax rate, and no one will be forced to take out an annuity if they do not want to. We are well aware that this is the biggest shake-up of pensions in almost a century—since Lloyd George was the Liberal Minister in the Treasury. As such, we recognise that it is absolutely crucial that we get it right. We are consulting on the detail before making further announcements later this year.

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In the meantime, the Finance Bill will make some initial changes to deliver greater flexibility with immediate effect. We are reducing the minimum income requirement for accessing pension savings flexibly from £20,000 to £12,000. We are increasing the annual withdrawal limit for individuals in a capped drawdown arrangement from 120% to 150% of an equivalent annuity. We are increasing the total pension wealth that can be taken as a lump sum from £18,000 to £30,000, and we are increasing the size of a pension pot that can be taken as a lump sum—regardless of other pension wealth—from £2,000 to £10,000. Taken together, these changes mean that more than 400,000 people will be able to access their pension more flexibly in the financial year 2014-15.

Dr Thérèse Coffey (Suffolk Coastal) (Con):
My right hon. Friend is being very liberal with his praise for various coalition colleagues. This has been a tremendous Second Reading so far in that we are liberating pensioners to make the best decisions for them. That, combined with the single-tier pension, means that we are putting people back in charge of their future.

Danny Alexander:
I am grateful to my hon. Friend for her contribution on these matters and for those specific comments. She is right that these are very liberal reforms. They are something of which we as a coalition can be proud. We have swept away the morass of means-testing of pensioners that built up under the previous Government and have ensured that every pensioner has a firm foundation from the state. They have a better basic state pension paid at the level of the single-tier pension. There is much greater flexibility for people to choose how to use additional savings in defined contribution schemes; after all, it is their money. I would go even further and say that this Government and this Finance Bill are about not only freeing up pensioners but providing additional freedom both for working people to keep more of the money that they have earned for themselves and for businesses that wish to invest.

Mark Field (Cities of London and Westminster) (Con):
I welcome the simplification of the pension arrangements, which predates this Budget. As the Chief Secretary rightly says, these flat-rate pension arrangements have gone on throughout this Government. Is he concerned that there will be increasingly strong pressure from the Opposition and others, who will say that the very generous tax benefits on pensions will be more difficult to justify if the annuity arrangements—in other words, the guarantee that this money will be used in retirement—are no longer in place?

Danny Alexander:
It is a long-established principle that there should be tax relief on pension contributions. This Government have sought to restrict that tax relief. We have lowered both the lifetime limit and the annual limit. I am not sure whether the Opposition’s proposal has taken into account the changes that we have made. I am not convinced that changing the rate of relief would alter very much the amount of money spent, because of the lower limits that we have already imposed. Speaking for myself—this is a matter that my party will be putting forward at the next election—the fact that we offer about £35 billion of relief on pension contributions every year and that more than half of that tax relief goes to the top 10% of earners is something that is

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worth further examination. As we continue with fiscal consolidation, which is necessary for our economy, we need to make absolutely sure that we are handling our tax system in as fair a way as possible, and not offering unnecessary tax relief to the very wealthiest in society.

Jacob Rees-Mogg (North East Somerset) (Con):
In any reform that my right hon. Friend proposes to make to the reliefs that are given on people investing in pension funds, will he remember that the money is taxed when it is withdrawn? It would be extremely unfair to tax people twice, both on putting money in and then taking it out.

Danny Alexander:
I certainly do bear that in mind. No party in this House—certainly not mine—is proposing any change to, for example, the tax-free lump sum arrangements, which is an important part of how the policy that my hon. Friend describes is delivered. Some people would equally well say that it would be unfair for someone to receive tax relief at 40% on the way in, but only pay tax at 20% on the way out. There are a whole range of issues that require a wider debate. In this Parliament, the coalition Government have set out some reforms for pensions tax relief. We have no intention of going further than the reforms that we have already made and I think that the annual and lifetime limits are the right ways to address this.

Guy Opperman:
I am most grateful to my right hon. Friend for giving way a second time. He has not touched on the regions yet, so I wanted to ask him whether he is aware that the Budget was welcomed by the North East chamber of commerce at a time when job numbers are improving, apprenticeships have almost doubled and the rise in the personal allowance, which is going through this week, will see a further 14,000 people taken out of income tax.

Danny Alexander:
I had not intended to mention the regions, but I am glad that my hon. Friend has given me the opportunity to do so. His point is absolutely right: the action we have taken and the economic plan the coalition has seen through, through thick and thin—the tax reductions for individuals, motorists and so on, the measures to support investment in important sectors, such as energy and offshore renewables, and the support for exporters—are creating jobs and prosperity up and down the country including, I am delighted to hear, in his area.

I was outlining the immediate changes to pensions flexibility that we are legislating for in the Bill. Taken together, the reforms that I listed mean that more than 400,000 people will be able to access their pension more flexibly in 2014-15. We are making these changes because this Government believe that those who have worked hard and saved sensibly are in the best position to decide for themselves how to provide for their own retirement.

In conclusion, as I am conscious that many Members wish to speak in the debate, the Finance Bill is ambitious, fair, liberal and deals with the biggest issues facing the finances of British people. It takes further steps to deliver long-term sustainable economic growth and to

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complete the biggest liberalisation of our pension system in nearly a century. It takes the first £10,000 of people’s earnings out of tax altogether and, as such, is a Bill that echoes my objective, and that of my party, of building a stronger economy in a fairer society in which every person has the best chance to get on in life. I commend the Bill to the House.

2.12 pm

Chris Leslie (Nottingham East) (Lab/Co-op):
I beg to move,

That this House declines to give the Finance (No. 2) Bill a Second Reading because it fails to address the cost-of-living crisis which will see working people worse off at the end of this Parliament than at the beginning; because while working people are £1,600 a year worse off it prioritises a tax cut for millionaires of on average £100,000; because it offers a marriage tax allowance which will help only a third of married couples, rather than a 10 pence starting rate of tax which would help millions more families; and because it fails to set out measures to tackle rising energy bills, get young people into work, boost housing supply and help families with childcare costs within this Parliament.

You would not know it from hearing the Chief Secretary, Madam Deputy Speaker, but this Finance Bill is a massive missed opportunity when much more is needed. It has so many pages—the document I have in my hands is only half of it—yet it is a minor Bill when we need major reforms to address public concerns. The annuities changes diverted attention from the shortcomings of the rest of the Budget, and that short-term approach reflects the short-term ambitions of the Chancellor and the Government at large.

We will seek to improve the Bill in Committee, but it is important that we reflect on its contents and on those things that ought to have been in it but were not. That is why we propose that the House declines to give the Finance Bill a Second Reading this evening: it fails to address the cost of living crisis that, as my hon. Friends recognise, will leave working people worse off at the end of this Parliament than they were at the beginning, as the Office for Budget Responsibility has predicted. While working people are £1,600 a year worse off, it prioritises a tax cut for millionaires of typically about £100,000 and offers a marriage tax allowance that helps only a third of married couples rather than, for example, a 10p starting rate of income tax that would genuinely help millions more families. It also fails to set out measures to tackle rising energy bills, get young people into work, boost housing supply and help families with child care costs. Those are the priorities that we believe ought to be in the Bill but are not.

Mr Reid:
The hon. Gentleman refers to the cost of living. Does he not understand that by next year, under his party’s policy, my constituents would have been paying 20p a litre more and those on the islands would have been paying 25p a litre more for their fuel than they are under this Government? That would have been a disaster for the cost of living of my constituents. Will he apologise to them for wanting to make the cost of fuel 25p a litre higher in their area?

Chris Leslie:
We are not opposed to the measure that the hon. Gentleman mentions, but he ought to be straight with his constituents. That is only one aspect of the tax burden that they face. Of course, his constituents have suffered many other tax rises and cuts in benefits

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since the general election, and as we start to walk ourselves through the Bill we can explore some of his priorities. We just need to consider the first set of clauses, under which he will be voting to give millionaires—the richest in society—and those who are fortunate enough to earn £150,000 and above, which can of course involve significant amounts of money, a tax cut to 45p from the 50p rate that his Government abolished. He willingly went along with that.

As well as the personal allowance change that Government Members often trumpet, we should have a 10p starting rate of tax. Government Members have supported at least 24 tax rises and principally the change to VAT, which has taken hundreds of pounds from the constituents of the hon. Member for Argyll and Bute (Mr Reid), perhaps by stealth. Perhaps they have not petitioned his constituency office and perhaps, with that little wry smile on his face, he has been counting the coins that he has been taking by stealth from the wallets and purses of his constituents, but that is a significant amount of money and he should be honest with his constituents about the VAT increase, the so-called granny tax, the child benefit reductions, the tax credit cuts and all the other changes.

Mr Reid rose—

Chris Leslie:
Perhaps the hon. Gentleman would like to take the opportunity to tell the full story.

Mr Reid:
I am grateful to the hon. Gentleman for giving way again. What is Labour’s policy on VAT? If Labour is elected, is the plan to keep it at 20p or will his party promise to reduce it?

Chris Leslie:
I love it when Liberal Democrats start talking about VAT. Of course, the hon. Gentleman promised to oppose the VAT bombshell, and my hon. Friends will remember the picture. I do not know whether he was driving the van that went round Parliament square at the time; perhaps the Chief Secretary was in the driving seat. Yet the hon. Gentleman has the temerity to ask what our position is on VAT. I cannot promise to get rid of the VAT increase that they have put in place, contrary to the manifesto on which he stood—yet another Liberal Democrat broken promise. When Labour makes promises in our manifesto at the next general election, we will make sure that they are fully funded and that the sums add up. If we do make promises, everybody will be clear where the money will come from—[Laughter.] Government Members do not like that idea, because it is so foreign to them. They are so used to making promises that they do not recognise the concept of trying to be honest and straight with the electorate.

Charlie Elphicke:
Will the hon. Gentleman give way?

Chris Leslie:
I will give way to the hon. Gentleman in a moment, but I ask him to bear it in mind that it is important to be open with his constituents about the full picture of what has been happening with tax and benefit changes. He needs to answer a question prompted by the independent Institute for Fiscal Studies, which has calculated the impact of all the tax and benefit changes since 2010 on his constituents. Its conclusion is that the typical household is £900 worse off after those tax rises and cuts to benefits and tax credits. Does he disagree with the analysis of the independent IFS?

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Charlie Elphicke:
The hon. Gentleman says that his pledges will be fully funded come the manifesto, but does he not accept that the fact that the Opposition have so far spent the bankers bonus tax more than 10 times does not give this House or the people of this country much confidence that they will be able to add up when we get to manifesto time?

Chris Leslie:
I shall have to send some details to the hon. Gentleman, because he is obviously not fully aware of the situation. I would never accuse him of misleading the House, as that would be unparliamentary, but perhaps he is unintentionally giving an impression that is not correct. We have said that we would repeat the bank bonus tax, which was very successful in 2009 and raised a significant amount of money, and spend it on starter jobs for the long-term unemployed. He should know about long-term youth unemployment because in Dover it has rocketed since he was elected.

Ian Austin (Dudley North) (Lab):
The jobs going to young people will be particularly welcome in the black country, where long-term youth unemployment is twice as high as it is across the country as a whole. To tackle the issue of plans adding up at the next election, would it not be simple for the Government to follow our proposal to subject our plans to independent scrutiny by the Office for Budget Responsibility? Why does my hon. Friend think they will not agree to that? Does he think that perhaps the Liberal Democrats in the coalition do not want to do that because it would show that their plans do not add up, as they did not at the last election, when they made a series of promises that they were unable to keep?

Chris Leslie:
I am grateful to my hon. Friend for addressing that point. Yes, such transparency would help a great deal. Let us elevate the level of public debate and allow an independent assessment of those policy costings. The public can then decide for themselves and make a judgment about the relative merits of the various policies in the manifestos of the major political parties. I know that in his heart the Chief Secretary to the Treasury agrees. I know that he realises that the Chancellor is standing in the way because the Chancellor wants to run the general election campaign by means of smears and falsehoods, giving a false impression of the policies of the other political parties. We must grow up and raise the standard of debate. Let the OBR be the judge of these things. Ministers can talk among themselves and perhaps negotiate concessions so that when we come to the Committee stage of the Bill, we may be able to reach cross-party agreement on that point.

Charlie Elphicke rose—

Chris Leslie:
I forgot to give way to the hon. Gentleman. Long-term youth unemployment has gone up in Dover by 125% since he has been its Member of Parliament.

Charlie Elphicke:
Long-term youth unemployment did go up in my constituency by 300%, and in the hon. Gentleman’s constituency by 400%—in the previous Parliament. Will he welcome the fact that long-term youth unemployment in my constituency has fallen by 22% in the past year and in his constituency by 15%?

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Chris Leslie:
If the hon. Gentleman wants to trade statistics, I am more than happy to do so. In my constituency there is a significant problem with unemployment, long-term youth unemployment and youth unemployment generally, and it has worsened significantly since the general election. He talks about the past 12 months. Let us hope we are turning a corner in aggregate levels of unemployment because it is about time that happened. The tax and benefit changes and their impact on our constituents are very significant indeed. I hope to have an opportunity to focus on a few of them.

Mr Kevan Jones:
I asked the Chief Secretary to the Treasury whether he could remember any time when the Liberal Democrats opposed the Labour Government’s spending commitments. Does my hon. Friend agree that Conservative Members have amnesia, in that they agreed to our spending targets right up until the banking crash in late 2008? If at that time we had followed the proposals of the present Chancellor of the Exchequer and the present Prime Minister in relation to things such as Northern Rock, that crisis would have been a lot worse.

Chris Leslie:
Trying to get inside the heads of the Liberal Democrats could take quite a long time. The Chief Secretary is enjoying being at close quarters with the Conservative party a little bit too much. The Conservatives have captured him—it is called capture bonding. Sometimes he even starts to view the abuse or the lack of it as rewarding. That is not coalition; that is Stockholm syndrome.

Guy Opperman:
May I return to the issue of the regions? Does the hon. Gentleman agree or disagree with the interpretation of the north-east chamber of commerce and the Trinity Mirror-owned Newcastle Journal, which welcomed the broad thrust of the Budget’s job-creating policies, its help for small and medium-sized firms and apprenticeships, reform of air passenger duty and general relief for energy-intensive industries?

Chris Leslie:
We should be cutting business rates for small and medium-sized enterprises. I am very surprised that the Government are focusing their help predominantly on the 2% of the largest multinationals—the big firms—and not doing, in my view, sufficient for that 98% of British business, the small and medium-sized enterprises. They will be the backbone of a recovery and we have to do much more to support them.

It is a shame that in the Bill the Government are choosing to go to that 20% rate in April 2015. We could instead use that resource and focus it on the multiplicity of small firms. They should be getting a cut in business rates. We calculate that it would deliver an average tax cut of at least £400 for 1.5 million properties through the business rates system, benefiting small and medium-sized enterprises, which after all are the backbone of the economy. They provide the dynamism to get the growth going, which we so desperately need.

Richard Benyon (Newbury) (Con):
I know it is the Opposition’s job to oppose, but does the hon. Gentleman wonder whether sometimes this is not good politics? He will be getting the same message from his chamber of commerce as I am getting from mine, as well as from

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hard-working families who are benefiting from the Budget, pensioners and people on low incomes? Instead of the reasoned amendment, surely there is something that he can welcome in this remarkably popular Budget—go on, have a go.

Chris Leslie:
It is simple. It is easy to do a Budget in which the Chancellor gives a few little things back, such as that penny off a pint of beer—buy 300 pints, get one free—and we are supposed to be grateful for such generosity. The hon. Gentleman should be advising his constituents to check their wallets. The thing about this Chancellor is that he takes far more with the other hand than he gives in the first place. That is his fundamental problem.

Several hon. Membersrose—

Chris Leslie:
Before I give way, let us look at what is happening in the new tax year that is about to begin. I urge my hon. Friends to think, for example, about the change hitting some of the poorest households in our constituencies, homes on the lowest incomes, which will see council tax support withdrawn at a significant level in the new financial year. Some have called this poll tax mark 2, with the poorest and most vulnerable households, carers, single parents and the disabled seeing their bills go up by 120%. The Government impose these tax rises in a stealthy way by saying, “Local government, we will devolve it down to you. It’s your responsibility”, but nobody is fooled by their techniques. Look at the squeezed middle and the extra tax those people are paying.

Mark Field rose—

Chris Leslie:
Before I give way to the hon. Gentleman, he can tell me this: I think about 2 million more people are being sucked into the 40p rate of income tax. I heard that that caused consternation among Members on the Government Benches. From this April, at a number of levels, people will lose out significantly.

Mark Field:
I will ask the questions rather than answer them, if the shadow Minister does not mind. He implores us to look at the Bill in a balanced way. We have heard statements about tax cuts for millionaires time and again over the past year and again today in the House. Does he recognise that the top 1% of British citizens are now paying the highest share of income tax that they have ever paid in the history of that tax—some 30%? Purists such as me have at times been mildly critical of the inconsistency of elements of the welfare and tax changes that have been made even during this coalition Government, but we have gained a hell of a lot of social cohesion in this country—

Madam Deputy Speaker (Dawn Primarolo):
Briefly.

Mark Field:
—in marked contrast to many other European nations, and the Government should be congratulated on that.

Chris Leslie:
I do not think it helps with social cohesion to move from the 50p to the 45p rate. That sends a very bad signal, and I know that Members on the Government Benches will feel that in their constituencies, especially when the Government are jacking up taxes

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and reducing tax credits and other help for some of the poorest in society, while giving that very generous tax cut—typically £107,000—to the average millionaire at the top of the scale. I do not think a 50p rate is unreasonable.

It is unreasonable for Government Members to say that a 50p rate does not raise any money—“we cannot possibly do it”. If it is telegraphed to that set of high earners at the point at which a 50p rate comes into effect that it will be going in a year or two anyway, of course they can stave off the point at which they draw down their dividend from their personal service company. Everybody knows how they managed to avoid paying that 50p rate. They waited until the new tax year ticked over, then they paid the lower rate. It was very simple, which is why in the statistics we suddenly saw bonus payments go through the roof, sky high, at the point when the 50p rate fell to the 45p rate. We should have been allowed a proper assessment of what happened at that point.

Jonathan Edwards:
I am listening intently to what the hon. Gentleman says and I agree with the point he makes, but will he explain why the Labour party proposes only a temporary return to the 50p rate, rather than a permanent return?

Chris Leslie:
We have said that a 50p rate needs to be the policy for the next Parliament. We make judgments in manifestos from one Parliament to the next. Tax policy should never be written in perpetuity. We have said that while the deficit is likely to be as high as it is, the 50p rate is justified. The hon. Member for Cities of London and Westminster (Mark Field) talked about social cohesion. While the process of deficit reduction will now have to continue well into the next Parliament, when it was not expected, the 50p rate is perfectly justified for good social cohesion reasons.

Jacob Rees-Mogg:
Will the hon. Gentleman give way?

Chris Leslie:
How could I resist the hon. Member for North East Somerset (Jacob Rees-Mogg)?

Jacob Rees-Mogg:
I am extremely grateful on behalf of North East Somerset to the hon. Gentleman for giving way to me. Is he therefore saying that he believes that the 50p rate is a good thing in and of itself for the symbolism that it brings to bear, even if it does not raise any money?

Chris Leslie:
I think it will raise a significant sum to help to alleviate the burden on lower and middle earners, and that is why it is important to have it. If it is there for not just a temporary period, but for a significant period, it would settle and be an important part of the tax system. But generally speaking, of course we all want all taxes to come to a lower level. I do not want to see taxes higher than they need be, but the hon. Gentleman has to understand that the context will be, I am told, a potential £75 billion deficit to be inherited by the next Government—I hope the next Labour Government—a significant amount of borrowing, hanging around the necks of whoever wins the general election, made worse by the fact that the Government promised that it would have been eradicated altogether.

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Richard Harrington (Watford) (Con):
I want to probe the hon. Gentleman further on his answer to my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg). Does it mean that he believes that the last Labour Government made a mistake by not raising the top tax rate to 50% for most of the 13 years that they were in power, and that they should indeed have done so?

Chris Leslie:
I know that Government Members like to expunge history from their memory banks, but there was a global banking crisis—I know this is a shock to some of them—which, from 2008 onwards, caused significant fiscal impact, which reduced revenues into the Exchequer and meant that tax rates had to be reappraised. It was at that point that the 50p rate was felt necessary, as one of the measures of fairness that we needed to put in place. I am proud that that Government took that step. It was not universally popular, as I know from Government Members, but necessary in order to help to reduce the deficit, whereas the Government chose to raise VAT and pull the rug from underneath growth that was beginning to come through in 2010.

I want to continue to scrutinise some of the details in the Finance Bill, because it contains a number of troubling changes. On capital allowances, my hon. Friends intervened on the Chief Secretary, and I also asked whether he thought it was a mistake that when taking office the Government reduced capital allowances—investment allowances—for businesses from £100,000 to £25,000. Yes, they are going back up again, but yet again we see more chopping and changing, more inconsistency; temporary measures, not giving the stability to business that it needs to plan for the long term. The Chief Secretary says that it was not a mistake that they should go down and now they are going up, but that, I am afraid, is typical of Liberal Democrats who like to face both ways on these matters.

In chapter 2 we have the married couple’s tax allowance. The Chief Secretary is deep in conversation, but I want to give way to him in a moment specifically on the issue of the married couple’s tax allowance. [Interruption.] From a sedentary position, he says that he will not intervene, but this is a critical point because I am not quite clear on his view of the married couple’s tax allowance. The Chancellor was apparently in a little bit of doubt about it, but the pressures from Conservative Back Benchers were such that they needed this transferrable allowance, which will help only about a third of married couples because it is available only to couples where one person is in work but the other does not use all their tax-free allowance. There are a number of other ways in which that amount of money could have been allocated. He could have decided to do it through the personal allowance—I know he is keen on that policy—perhaps a 10p starting rate of tax. Does the Chief Secretary agree with the implementation of the married couple’s tax allowance? This is his opportunity to set out the Liberal Democrat attitude to these things. I will give way to him. The record will have to show that, for whatever reason, the Chief Secretary does not want to stand up and sing the praises of the married couple’s tax allowance in this particular agenda. Yet again, he is stifled by his capture by the Conservative party, unwilling to speak his true mind on these issues.

On the employment measures in the Bill, such as they are, yesterday the Chancellor was full of rhetoric about full employment, yet the Government have come forward

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with no new policies to deliver this. The number of young people out of work for 12 months or more has nearly doubled since the Chancellor and Chief Secretary came to office, and we have a record number of people who want to work full time but are being forced to work part time, a Work programme that is so spectacularly unsuccessful that people are more likely to go back to the jobcentre than find work, and only 5% of disabled people on the Work programme have found work through that programme. We clearly need compulsory starter jobs for the long-term unemployed to help them to repair their CVs and to get back into work and on to the ladder to a long, sustainable career.

Stephen Doughty:
I agree with my hon. Friend on the compulsory jobs guarantee, and it is a great shame that we do not see such a measure in the Bill. Does he agree that there is a massive contrast between this Government when they took office and cancelled the future jobs fund, and the Welsh Labour Government in Cardiff who introduced the Jobs Growth Wales scheme, which has now seen nearly 12,000 people across Wales benefiting, and one of the lower rates of unemployment in the UK because of that measure?

Chris Leslie:
Conservative Members love to bash what is going on in Wales. They have an anti-Welsh attitude to these things, but it is one of the great success stories of devolution, making sure that they focus on a meaningful back-to-work scheme, particularly for those who have been out of work for a prolonged period. That is what we need to have, and I wish Ministers would learn from that.

Chapter 4 deals with annuities and pensions. Obviously, as we have said, in general those annuity changes are to be welcomed. Annuities are an outdated product and they failed too many pensioners, but it is important to reiterate the tests that we have. What sort of advice or comprehensive guidance will be put in place for those reaching retirement and potentially having to make calculations of income perhaps over a third of their lifetime to come, and what will happen to the annuities market for those who do wish to purchase such a product to have a steady stream of income in perpetuity?

Mr Kevan Jones:
Does my hon. Friend also think that the Government should publish their modelling on the proposal to see what effect it will have, not only on the annuities market but on the cost to the taxpayer in the long term, in terms of matters such as housing benefit and future care costs? Producing that modelling and making it transparent for all would allow people to see whether the policy will have a long-term implication for the taxpayer.

Chris Leslie:
It is vital that we have serious consultation on those measures. We support flexibility in principle, but the changes cannot be made without taking into account the wider implications, so it is important that we have that level of information and analysis in the Treasury projections. I do not know whether the Government were motivated by the desire to benefit the population more broadly or by the short-term opportunity, following the annuities changes, to bring in a vast amount of tax revenue from pensioners much earlier

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than would otherwise have been the case. All I know is that the Chancellor used the annuities issue to provide a veneer of long-termism over what was otherwise an exceptionally short-term Budget and what is an exceptionally short-term Finance Bill.

Clauses 112 and 113 deal with the old question of the bank levy. My hon. Friends will be familiar with the Government’s track record on the bank levy. We will scrutinise those clauses very closely indeed, because The Daily Telegraph, among others, has reported that they could mean a secret tax cut for the banks. Last year Barclays paid £504 million in levy charges and HSBC paid £544 million—the most of any bank. But under the draft proposals the Chief Secretary is bringing forward in the Bill, Barclays’s bill would have been £129 million lower and HSBC’s would have been £169 million lower. What is going on? Given that the levy was supposed to catch up with the lack of collection in previous years—it was supposed to increase by 20% this year—it seems very strange that these clauses might give the banks a very significant saving indeed.

The purpose of the bank levy, of course, was to allow the Government to take £2.5 billion every tax year. It was an unusual tax because they set the amount of revenue to be raised and the methodology revolved around that. In its first year, the levy brought in £1.8 billion, which was a significant shortfall. Things got worse the next year, because in 2012-13 it raised just £1.6 billion. My hon. Friends know the attitude Her Majesty’s Revenue and Customs takes to our constituents if an amount of tax they are asked to pay is not forthcoming, but that is not the case when it comes to the banks. It has gone soft in collecting the money the levy was supposed to raise.

We read in the small print of the Office for Budget Responsibility’s report that accompanied the Budget that in 2013-14, for the third year running, the bank levy is projected to raise only £2.3 billion, which falls short yet again. The combined shortfall from the past three years is now a very significant £1.8 billion. We could pay the salaries of 60,000 nurses with that sum.

Mark Field rose—

Chris Leslie:
It is a very significant sum of money, and I am sure that the hon. Gentleman will have something to say about that.

Mark Field:
I certainly do. The hon. Gentleman must also recognise the importance of banks lending into the real economy, particularly as the recovery takes hold. Does he not recognise that if we are to ensure that banks are properly capitalised again, repeated demands for an ever-larger banking levy—it is already the largest it has ever been, even before 2010—could be diametrically opposed to the long-term interests of the British economy? In other words, it could hinder efforts to get the banks lending again.

Chris Leslie:
Of course the banking sector is very important. It has been dysfunctional for a prolonged period. Net lending to business has fallen consistently throughout this Government’s time in office. But I have to tell the hon. Gentleman that when the Treasury said that the levy would raise £2.5 billion, it should have got that money in. All our constituents are paying more in tax and have lost out significantly because that money

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has not been forthcoming from the banks, which after all owe a little bit back to the taxpayer for the bail-out that followed their reckless lending decisions in previous years.

The very least we should do is ensure that we have a functioning bank levy that brings in the expected sums. We would ensure that it raises a further £800 million. We would use that money to expand free child care places for working parents of three and four-years olds by extending free nursery care from 15 to 25 hours a week. That would also be a good way of helping parents to get back into the labour market and to get the jobs they need. A 15-hour arrangement—three hours a day—for child care does not give a parent looking after a youngster the opportunity to get into work, but 25 hours a week would make a significant difference. We could do that through a reasonable and modest change to the bank levy.

Jacob Rees-Mogg:
Following the point made by my hon. Friend the Member for Cities of London and Westminster (Mark Field), does the hon. Gentleman recognise that an £800 million additional bank levy would reduce the ability of the banks to lend into the real economy by between £8 billion and £12 billion?

Chris Leslie:
I disagree with the hon. Gentleman on that point, not least because the shortfall in the amount the Treasury said it would raise from the levy has been so much larger than £800 million. I think he needs to speak with Ministers. If he disagrees with £2.5 billion, he needs to tell them now. The Exchequer Secretary is in the Chamber, because he is the one—unbelievably—who was responsible for designing the bank levy. He must be massively embarrassed by its total failure. Why has it raised so little? How does he explain the shortfall? I will give way to him if he wishes to offer an explanation.

The Exchequer Secretary to the Treasury (Mr David Gauke)indicated dissent.

Charlie Elphicke rose—

Chris Leslie:
No, nothing is forthcoming. Perhaps the hon. Member for Dover (Charlie Elphicke) can help us on that.

Charlie Elphicke:
The hon. Gentleman referred to the article in The Daily Telegraph but did not explain it fully to the House. It shows that the Chancellor is keen to see foreign banks paying a fair share of the levy. It is not about letting off the major clearers; it is about ensuring that all banks in the UK pay a fair share. Surely that is right.

Chris Leslie:
That is a very interesting explanation. There is a shift in policy, which is to let certain banks off the hook when it comes to the bank levy. Perhaps the hon. Gentleman is right and that is a strategy. I have given the Minister an opportunity to explain what exactly the Government’s plan is, but he will not put it on the record. We will have to explore that in more depth in Committee.

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While we are on the financial services sector, let us look at what the Government are doing in clause 107, which relates to stamp duty reserve tax. My hon. Friends might begin to wonder what that is all about, especially when we say that it is known as the schedule 19 charge, which refers to the 1999 Finance Bill. Many people think, “Oh well, we’ll see what comes of these taxes.” But the schedule 19 charge, set out in clause 107 of this Bill, seeks—this is the priority of these Conservative and crypto-Conservative Members—to give a tax cut of £145 million to the investment management industry by abolishing stamp duty reserve tax. At the same time, my hon. Friends’ constituents are having to cope with the bedroom tax, extra council tax charges and the VAT increase. Despite the hardships they are facing, the priority of the Chief Secretary and the Exchequer Secretary is to give away £145 million by abolishing stamp duty reserve tax. I know that they have been lobbied heavily on that.

We will oppose that change, because we think that the Government should be using that resource to help scrap the bedroom tax, if indeed it is raising any money—I have my doubts about that. The National Housing Federation states that it might well be costing more than the Government planned. We certainly should not be giving away that money, especially at a time when the investment management industry, which holds £5.4 trillion in collective funds, increased its holdings by about 7% in 2013. I do not think that £145 million is an unreasonable sum to ask from a sector that has been doing very well in recent years. We should be making sure that we pursue a fair policy and so will oppose that clause.

We then come to the Bill’s tax avoidance measures. We know that the Government have a bad record on that—[Interruption.] Well, they do. The oh-so-successful Exchequer Secretary, who cannot even manage to get the amounts of money he promised from the banks, cannot manage to get from the Swiss the £5 billion he promises through the Swiss tax deal. The Chief Secretary stood up a moment ago and said that he would get only £1.7 billion. We had a deal with the Liechtenstein Government, which we projected would bring in £2 billion; in fact, it has brought in £2.5 billion. When we have tax deals with tax havens, they work. However, when the Exchequer Secretary gets his fingers on these things, it is amazing how it all goes wrong—it is his reverse Midas touch.

The Government have fallen into bad habits in pencilling into the Red Book projections of revenues from the avoidance measures that involve what the OBR calls particularly uncertain assumptions. The Government are, of course, quick to spend the projected money; Paul Johnson from the Institute for Fiscal Studies calls such moves the Chancellor’s manoeuvres, always relying on revenues that are by nature uncertain. It is important that we scrutinise whether the supposed tax avoidance deals will deliver what the Government say.

Rather than the measures in the Bill, we need action to deliver starter jobs, guaranteed for the long-term unemployed. The number of young people out of work for a year or more has doubled and we need compulsory starter jobs for those who have suffered unemployment, which is a scourge not just on society but on their career prospects. We need action on child care. Free child care should be extended from 15 to 25 hours, paid for through a proper collection of the bank levy.

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We need a help to build scheme to counter-balance the Help to Buy scheme. There is a serious risk—as the Chief Secretary knows, even the Governor of the Bank of England has concerns about these things—of a lop-sided recovery unless we match the boosting of demand with the boosting of supply. A help to build scheme particularly focused on ensuring that small and medium-sized construction companies can do better is one way to make a big difference.

Guy Opperman:
Is the hon. Gentleman aware that in the north-east, the Help to Buy scheme is absolutely transforming the housing market? In Humbles Wood in Prudhoe, a housing development in my area, 90% of new purchases have been through Help to Buy. That must be good news that the hon. Gentleman wants to welcome.

Chris Leslie:
We do not oppose the Help to Buy scheme unless it is not accompanied by a help to build scheme. The supply of housing is key. Housing policy must revolve around affordability. We now have the lowest level of house building since the 1920s; the Government cannot just turn a blind eye to that problem. Affordability has to be at the heart of our approach. It is all very well helping people on to ever-higher mortgages chasing ever higher prices, but unless something is done to supply new buildings, we will not deal with the problem of affordability.

Mr Kevan Jones:
I am not sure what nirvana the hon. Member for Hexham (Guy Opperman) lives in if he thinks that the housing market in the north-east is booming. Average house prices in the north-east are still £5,000 lower than in 2008; that compares with an increase of about £77,000 in London. The hon. Gentleman also fails to recognise that 16% of people in the north-east are still in negative equity. The idea that somehow the housing market in the north-east is booming is wrong. We have a two-speed Britain—a booming south-east and London, and a stagnating north.

Chris Leslie:
For all the Government’s talk of a balanced, sustainable recovery, we see no action. Most of our constituents and most businesses would recognise that supply and demand have to be part of the picture. Everybody recognises that except, it seems, for the Chancellor and Chief Secretary, who do not recognise the fundamental problem in their approach.

There needed to be tough decisions, such as the 50p rate, in the Bill to make sure that there was fairness in dealing with the deficit and that we tackled the Government’s failure to keep their promise about balancing the books. That has not come to fruition. We need to help with business rates; we should be cutting them rather than simply focusing help on 2% of companies.

The Government are not ensuring a sustainable and balanced recovery. Consumers are having to dip into their savings at an alarming and increasing rate. The OBR even predicts that growth may well slow in future, when those savings run out. Exports are not predicted to contribute a thing to the economy for the next five years and nothing in the Budget tackles the country’s productivity crisis that has emerged in recent years.

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Instead, the Exchequer Secretary and Chief Secretary have convinced themselves that cutting public services and raising taxes have helped economic growth. They believe their own propaganda about expansionary fiscal contraction, which was the philosophy of the right in British politics. It used to be the opposite of the Liberal Democrats’ view, but of course they have now bought into the concept.

David Rutley (Macclesfield) (Con):
The hon. Gentleman does not want to take this point from Government Front Benchers, but I have just been to the annual conference of the British Chambers of Commerce and it is absolutely delighted by the Bill and the Budget, which will help its businesses across the country. Will the hon. Gentleman join it in welcoming the Bill?

Chris Leslie:
No, because the Bill could be significantly improved. I have given a number of ways in which it should be doing more for small businesses, for fairness in society and for the hon. Gentleman’s constituents. I think he will pay the price when the election arrives. He is under the impression that fiscal contraction is how growth materialises, but he needs to realise that growth is coming despite, not because of, the Government. I am afraid that they have still not learned that lesson.

The Conservatives and Liberal Democrats are desperate for people not to spot their broken promise on borrowing and the deficit. Three years of economic stagnation will leave the next Government with a budget deficit of £75 billion. It is astonishing that in his Budget speech, the Chancellor had the nerve to stand there and say:

“as a nation we are getting on top of our debts”—[Official Report, 19 March 2014; Vol. 577, c. 781.]

The Government have added a third to the national debt, which now stands at £1.2 trillion. What a nerve the Chancellor showed! He promised to stop adding to the national debt, but has borrowed more in the past four years than the last Government did in 13 years.

The Bill is bereft of the measures that we need to make sure that the recovery is sustained and shared by all. It has nothing new to tackle long-term youth unemployment, nothing to secure an energy price freeze and nothing to bring forward real help now for working parents who need extended child care. It has nothing new on infrastructure investment, which is still lagging behind, and nothing to address the wages crisis that leaves the typical person £1,600 worse off than in 2010. The Bill is not just a missed opportunity; it is so wide of the mark that it misses the point altogether. It is designed to help Ministers limp from here to election day. It falls short and is not good enough.

We would urge Ministers to go back to the drawing board, but it is increasingly clear that they do not even have a drawing board. I urge my hon. Friends to support the reasoned amendment. We will try our hardest to secure improvements to the Bill in Committee. This is a minor Finance Bill from a Government out of ideas. They delayed the Queen’s Speech because they do not have enough to put in it. The Bill should address the cost of living pressures faced by the majority and it should set a long-term ambition for a recovery built to last and felt by all. The country deserves a better Finance Bill than this.

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2.58 pm

Mark Field (Cities of London and Westminster) (Con):
It is usually a pleasure to joust with the hon. Member for Nottingham East (Chris Leslie), but his comments were unremittingly negative. It is amazing that he contrived a speech lasting no fewer than 46 minutes about a Finance Bill that supposedly had so little in it.

For almost the past four years, the British electorate have, perhaps grudgingly at times, recognised that the coalition’s avowed economic plan—the elimination of the structural deficit in the course of this Parliament—has been the right path in response to our grisly economic inheritance.

Key to the plan was consistent growth. The Office for Budget Responsibility’s predicted compound growth of 2.7% to 2.9% for the duration of the Parliament accounted for more than half the deficit reduction programme. As the hon. Gentleman rightly pointed out, that has not been achieved, but the international capital markets have maintained their confidence in the coalition despite its first three years having being characterised by somewhat sluggish growth. Fears that excessive borrowing on the scale that became necessary between 2010 and 2013 would lead to higher interest rates have proved entirely unfounded.

Mr Kevan Jones:
I know that 2010 seems a long time ago, but does the hon. Gentleman remember that when this Government came to office the economy was growing and we went into decline only because of the sucking out of demand and investment in the economy during their first two years?

Mark Field:
The hon. Gentleman will be well aware that it is in the power of any Chancellor to orchestrate something of a pre-election boom. The VAT reduction certainly assisted in that, such that there were two or three quarters of unsustainable growth in the period from the end of 2009 to 2010, as became apparent fairly quickly.

We have seen some very significant growth. The first glimpses that came a little over a year ago in spring 2013 have turned into healthy, consistent growth that has in many ways surprised even economic experts. This has been maintained, alongside a very strong performance in employment, and barring unforeseen economic shocks it should continue for the rest of this year and beyond.

After the frenzy of Labour’s energy price freeze promise, the early new year period has allowed the Government to regain their footing and reset the important message that we are following a long-term economic plan that will benefit hard-working people. If, in the coming months, we can overlay this sober foundation with a sense of upbeat optimism and positivity about our nation, we will have a solid base from which to bat away unremittingly negative political attacks of the kind that we heard earlier. To complement consistent messaging on the deficit, we must also give the electorate a feeling of hope about life under a future Conservative Government. Nevertheless, the Treasury has been right to be wary. A giveaway Budget implemented by this Finance Bill would have sent out entirely the wrong signals. If money were found for substantial tax cuts, our opponents would question the need for further reductions in the welfare budget, and this at a time when the Institute for Fiscal Studies calculates that we are only two fifths of the way through the total planned spending cuts.

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In the months ahead, the Chancellor might perhaps borrow some tricks from the Bank of England. While the notion of forward guidance has hitherto proved something of a mixed success for the Governor of the Bank of England, Mark Carney, it might prove a useful tool for the Treasury. Unlike some of my hon. Friends, I have always doubted the wisdom of promising instant and substantial tax cuts, as that puts in jeopardy our central mission of restoring order to the public finances. However, there is no doubt that reducing the tax burden should always be part of a Conservative offering, not least as we approach a general election. I hope that in a future autumn statement the Chancellor will offer his own brand of forward guidance, giving a clear signal that when progress has been made on reducing the deficit, and that progress breaks past a certain point, a series of tax cuts will kick in. In that way, the electorate will know full well that while our priority is, and must remain, stability, our ultimate aim will be a low-tax, competitive economy.

The Opposition’s messaging over the past six months, as in the course of this debate, has blended naive populism with flagrant opportunism. Their appeal has rested not on their practicality but on their exploitation of a deep sense of unease among many in the electorate that the current system does not deliver for them. The Government’s response has at times been too erratic and confusing, and has lent greater weight to policies that should rightly be dismissed as dangerous and unworkable. What voters need from us, and what this Finance Bill offers, is a sense of consistency and simplicity.

Rather than blowing us off course, the Bill implements a Budget that has been designed to cement our position as a calm and rational team slowly and patiently getting the UK economy back on track and the public finances under control. Substantial or radical reductions in tax should sensibly come only when that mission has been accomplished. Perhaps understandably, this sober message was not the headline-grabbing element of the Budget. Rightly, the proposed liberation of pensions will now be subject to extensive consultation. These ground-breaking reforms will need to be assessed to ensure that any potential unintended consequences are properly analysed before any new pensions regime is put in place.

I want to put on record some specific concerns about the tax avoidance regime that may differ from those raised by the hon. Member for Nottingham East. I addressed these last Friday in an article in The Daily Telegraph about the operation of Her Majesty’s Revenue and Customs’ disclosure of tax avoidance schemes—DOTAS—regime. I have been struck by the number of financial advisers and investors, large and small, from across the country who read my piece and have responded over the past few days by outlining their own cases of particular concern.

Last year, for the first time, aggregate investment in UK-based film production topped £1 billion. This has been aided by a crucial tax break that has attracted huge sums of private cash into the British film industry, which we can be proud of and which is recognised on the global stage with the success of many British films at the Oscars. In last month’s Budget, the Chancellor introduced a theatre tax break to match similar provisions for high-end TV, film, and televised animation. I warmly welcome this energy from the Government on behalf of our crucial creative industries. As well as being home to

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the much-maligned banking industry, my constituency is also the traditional home of many of our great, globally competitive creative sectors in Soho and Covent Garden. I campaigned for some three years to get the animation tax credit that was successfully announced in the 2012 Budget and agreed on in all parts of the House.

Last month, however, I heard a tale of woe from a group of experienced private investors who have found themselves squeezed awkwardly between the coalition’s ambitions for the creative industries and its other understandable priority—a clampdown on tax avoidance. Their experience should be a warning sign to any investor who has sought to engage in an open and transparent relationship with HMRC. It should also give Treasury Ministers pause for thought—not least the Exchequer Secretary, who is in his place, as he aggressively pursues the Government’s anti-avoidance agenda in the months ahead. Some years ago, the group who came to see me had approached HMRC with their model for private investment in the UK creative industries. After extensive discussion on its structure, they were not only given the green light but told that their vehicle was exactly the sort of thing that the Government were envisaging. On the basis of this understanding, the group proceeded to invest more than £1 billion of risk capital into the British film industry, leading to the production of more than 60 home-grown films.

Given the discussions they had had, HMRC considered these legitimate investors to be firmly “inside the tent”, but as a precautionary measure they elected to place themselves on the DOTAS register. Because tax avoidance measures are now so widely drawn, it has been common practice to err on the side of caution by signing up to HMRC initiatives of this sort. The investors thought nothing more of the DOTAS registration until a flurry of high-profile scandals, or so-called scandals, came to light whereby film investment vehicles had been used by celebrities to slash their tax bills. Rather than sifting through the egregious examples of so-called aggressive avoidance through legitimate investment vehicles, HMRC threw a blanket of suspicion on to any DOTAS-registered scheme. Keen to establish their vehicle’s legitimacy as swiftly as possible, and exhausted by HMRC’s consistent mismanagement of their case, as they see it, the investors elected to put their scheme before an independent tax tribunal.

Currently, if the UK tax authorities wish to challenge the legitimacy of a DOTAS-registered scheme in court, the taxpayer is permitted to hold on to the disputed tax while the case is being resolved. This was discussed earlier by the Chief Secretary. Because the Government believe that this incentivises scheme promoters to sit back and delay resolution, they now propose to extend the accelerated payments measures to existing DOTAS-registered schemes. This means that disputed tax will be paid up front to HMRC and returned only if a scheme is subsequently found to be legitimate. However—this is where the Government need to rethink their understandable enthusiasm for clamping down on tax avoidance—no exception is proposed in cases where taxpayers have demonstrably not sat back and delayed as long as possible. My investor constituents are desperate to get their dispute settled by an independent arbiter as a

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matter of urgency. In their case, it is HMRC that is stalling progress. Legitimate investors understand the need to deal quickly with the tens of thousands of outstanding mass-marketed avoidance cases currently clogging up the courts. They simply propose an exception in the case of existing DOTAS-registered schemes whose promoters have taken all reasonable measures to enable a dispute to be brought before the statutory appeals tribunal.

It strikes me as a shocking breach of faith that the Government are now attempting to impose a requirement on such individuals to pay a disputed up-front sum when it is an agent of the state—in this case, HMRC—that is deliberately and actively delaying the sitting of the tribunal. Worse still, I fear, is the general message being sent to other private investors, who stand to be deterred from any future investment in the UK film industry.

DOTAS was designed with the best will in mind—something you may well remember, Madam Deputy Speaker, as the system came into play under a previous Administration. It was designed, rightly, to promote openness and transparency in investors’ relationships with HMRC—in principle, a welcome step. However, DOTAS is now in effect helping to produce retrospective legislation, with DOTAS declarations being used as a stick with which to beat legitimate investors who never planned on having liquid assets to meet disputed liabilities. I fear that augurs ill for the Government’s broader, much vaunted anti-avoidance plans, as set out in the Bill, and their overarching plan to make Britain entirely open for business.

It is useful at this juncture to highlight some of the letters I have received in response to my article of last Friday. One constituent, a small-scale investor in the scheme, advised me:

“HMRC has previously offered us full relief on our cash contributions if we forgo relief on the loan element. We haven’t agreed to this. Now they plan to make us pay all the tax in the autumn. Many will feel pressured to settle on the basis of HMRC’s earlier offer as that will reduce the cash to be found by some 37%. This is harassment, which if conducted by a loan shark would rightly have you and your colleagues legislating. HMRC has no case and is relying on intimidation and extortion instead.”

A correspondent from further afield wrote:

“I am an ordinary, law abiding person who has never knowingly cheated anyone, least of all HMRC! But their endless delays and apparent moving of the goal posts make me feel almost like a criminal.”

Another wrote:

“The cries of protest highlighting this radical shift in power seem to have fallen on deaf ears of government officials. I represent hundreds, if not thousands of similar professionals that are on the brink of ruin as a result of the changing of the goal posts by HMRC whose unchecked powers seem to be morphing.”

That concern was shared by many others. There is concern that the decision process lies solely in the hands of a designated officer—some relatively anonymous HMRC official, acting as judge and jury, with no independent or proper safeguards. That does not seem right, as pressures on individuals to act in the best interests of a Department that is failing to collect taxes as quickly as it would like will be immense.

I know we discussed this matter in the House in the context of retrospective legislation last year, but we need to give serious thought to how Parliament can properly control such Executive power. There seem to

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be no checks or balances on a Government Department, and that does not seem the right way to address our tax policy.

In my view, if the Treasury wishes actively to encourage investment via additional tax credits, we must be assured that legitimate investors’ previously agreed, transparent vehicles are not at some point going to be subject to unplanned for, up-front tax liabilities in the event of a sudden change to the rules by HMRC. As the Exchequer Secretary will know, I have consistently pressed for Government efforts on tax evasion to go hand in glove with the creation of a comprehensive pre-clearance regime. That would allow firms and their tax advisers to road-test proposed taxation schemes with HMRC officials. Ideally, if that were to work efficiently, no new scheme would be permitted to be marketed until such time as approval had been given.

I am sorry to speak on a slightly negative note, because as I have said I support much of the Bill, but it is important to put on record some of the concerns about how the anti-avoidance process is working. Alarm bells should be ringing throughout Parliament as we preside over this unprecedented transfer of power to HMRC. This agency of the state is being empowered not only to apply the law but to a large extent to rewrite it. In summing up, will the Minister provide assurances on the steps that he is putting in place to ensure that incorrect seizures are avoided and that hardship will not follow as a consequence?

The Government’s aims to encourage investment in British industry and to clamp down on aggressive tax avoidance and evasion should not be incompatible. I trust that during the full consideration of the Bill we will further highlight some of those unprecedented powers to rewrite the laws and ensure that Parliament and, above all, the Treasury take a step back, so that we have a system that, as far as possible, promotes the sort of investment that all of us crave, not just in the creative industries but throughout the UK economy.

3.15 pm

Bridget Phillipson (Houghton and Sunderland South) (Lab):
I am grateful for the opportunity to speak in this debate. I want to begin by focusing my remarks on the north-east economy: the challenges that we face and why my constituents will struggle to recognise the picture presented earlier by the Chief Secretary to the Treasury as he set out the measures in the Finance Bill.

The need to secure a stronger, more balanced economic recovery is pressing. My continued concern is that, unless the Government are willing to act to address the imbalance, the north-east will continue to be left behind. The north-east economy has many strengths and is an asset for the United Kingdom. We are one of the leading export regions in the UK, and in 2011, 2012 and 2013 we were the only English region to achieve a positive balance of trade.

A large contributor to that surplus is Nissan. Its plant on Wearside is one of the world’s most productive, producing a car every 60 seconds. Nissan’s continued success and the skill and determination of the work force are sources of immense pride to us all. We have long been a region with an identity rooted in manufacturing and engineering, and with Nissan, Hitachi and many others we will show just what we can achieve. For that

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reason, I welcome the measures on investment allowances in the Bill. However, it is a U-turn from previous cuts to allowances and, for all his refusal to acknowledge it, the Chief Secretary must accept that it was a mistake to have made those cuts in the first place. None the less, the measures are to be welcomed.

The automotive industry continues to show great strength, providing high-skilled jobs and investment. However, it is important to acknowledge that, particularly over the past decade, growth has come about through active Government involvement, by working with Nissan and the work force there. Over the past decade Nissan has rightly enjoyed many accolades. At times, sadly, jobs were lost at the plant, but we now enjoy the largest work force there on record, which is of course to be welcomed.

Mr Jim Cunningham (Coventry South) (Lab):
My hon. Friend mentions the automobile industry. I am sure she would appreciate that the previous Labour Government did a lot to encourage Tata to invest in Jaguar Land Rover, which is one reason why we are starting to get great success in the manufacturing industries, including in her region.

Bridget Phillipson:
I agree entirely with my hon. Friend’s point. I was about to come on to look at the Labour Government’s record on the automotive industry and on industrial strategy. It is simply not right to begin looking at the sector only from 2010. A lot of work went in, over a long period of time, with the work force and the trade unions as well as through Government, to make sure there were the right skills and the investment needed for the industry to compete in the future. The Labour Government took that seriously; I hope this Government will take that forward.

Mr Kevan Jones:
I agree with my hon. Friend about the long-term strategy that was put in place. Also, when help was needed at a crucial time in the downturn, the vehicle scrappage scheme helped work forces not only at Nissan but in the constituency of my hon. Friend the Member for Coventry South (Mr Cunningham). It may have been a short-term stimulus, as the hon. Member for Cities of London and Westminster (Mark Field) said, but it certainly helped at that time.

Bridget Phillipson:
My hon. Friend makes the point that I was just about to come to, about the car scrappage scheme. There was also the enterprise finance guarantee. During the downturn that was crucial in keeping people in work and keeping the plant productive. My hon. Friend has no doubt visited Nissan and will know that it is crucial for a plant to keep staff numbers up, to be able to compete and to attract contracts. Nissan is very competitive internally, and Nissan in Sunderland continues to have to compete with plants in Europe and across the world. It is crucial to maintain core staffing levels so that when contracts come up internally, we can bid for them in Sunderland. The car scrappage scheme was crucial in making sure that we kept people in work at the plant and in the supply chain.

Ministers cannot afford to be complacent about the degree of success we have been enjoying and about ensuring that it is maintained. Continued success is not inevitable. A constant concern that is raised with me is

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that talk of Britain leaving the European Union and all that would follow from it creates massive risk and uncertainty about investment in Nissan. Nissan has rightly warned against that and Government Members should be mindful of the fact that continuing to engage in a Back-Bench debate about the future of Britain in the EU could have damaging consequences for areas such as mine, which rely so heavily on our ability to export to Europe.

A report published just yesterday outlined that the north-east and the midlands would be hardest hit by Britain leaving the European Union. That is no doubt linked to the automotive industry in both regions and our ability to export to that single market.

Mr Jones:
I concur with my hon. Friend, but it is not just the automotive industry in the north-east that would be affected. Investment in Komatsu, which employs a lot of people in my constituency, and the new, welcome investment in Hitachi would also be affected. The chemical industry on the Tees also relies heavily on European markets.

Bridget Phillipson:
That is absolutely the case. One of the ways in which Sunderland has diversified its economy has been to move towards software. The number of new small software firm start-ups is among the highest in the UK. Many of them are looking to expand into and open offices in Europe and I have no doubt that they do not find helpful the constant discussion we are having about Britain’s role in Europe. They want to expand what they export and their role in Europe by opening offices there. They do not want to have a pointless debate about Britain’s role; they just want to get on, create jobs, invest in our region and continue to diversify our economy. I have no doubt that my hon. Friend, like me, will recognise the fact that there was a big shift in the north-east economy in the 1980s and ’90s. We have transformed our industries, although that has not been entirely of our own choosing—we had to transform them. In fact, given the transition that had to take place, we have been remarkably successful. The fact that the software sector in Sunderland continues to grow, including in Rainton Bridge in my constituency, shows what we are capable of in the north-east, but we need the Government to work with us to achieve it.

Mr Jim Cunningham:
On the point about companies investing in this country, I am sure my hon. Friend will agree that a lot of companies, such as Nissan and Jaguar Land Rover, initially invested in this country because we are in Europe. If the Government continue to undermine that confidence, they will create some major problems in the west midlands and, as she has indicated, in the north-east.

Bridget Phillipson:
We should not underestimate the scale of the challenge that companies such as Nissan face. It is incredibly productive and has a wonderful work force, and the Qashqai, which is produced on Wearside, was recently voted car of the year. There is so much good news in terms of Nissan and other big companies in the north-east. However, companies such as Nissan require long-term stability and the ability to

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make decisions about where investment will come from in the years ahead. The prospect of an in/out referendum hanging over our heads until 2017 and the constant discussion about it are simply not helpful when it comes to jobs and investment in the north-east.

The most recent unemployment figures reveal that the north-east still has the highest unemployment rate in the country, standing at 9.5%. It is clear that the recovery has yet to deliver fully for my area. The picture of youth unemployment is even more troubling. Across the three parliamentary constituencies covering Sunderland, nearly 2,500 young people aged 18 to 24 have been out of work for more than 12 months. In my constituency, that represents an increase of 1,650% in four years.

Our region has seen in the past the economic and social damage caused by long-term unemployment, destroying communities and draining hope from countless good people and their families. Ministers, however, appear to be complacent about the scale of the problem. They should act now and implement Labour’s plan for a jobs guarantee for all young people who have been out of work for more than a year, because it is clear that the Youth Contract and the Work programme are failing. This Bill is another missed opportunity to tackle the scourge of youth unemployment and long-term unemployment in constituencies such as mine.

I speak to many people in my constituency who are desperate to work and who are applying for job after job and getting nowhere. They do not even hear anything or get an interview—they make no progress. It is hard to underestimate the despair that that causes among young people who are without hope for the future and not sure where things will take them. One man who came to my constituency surgery last week told me that he faces the prospect of getting up and looking for work every day, but he has been doing it for too many years now. He is desperate to work and has a lot to offer, but it is a highly competitive jobs market in which lots of highly skilled people who have lost their jobs in the public sector are able to compete and are chasing too few jobs. The Government must address the matter urgently.

Sheila Gilmore:
Does my hon. Friend recall, like I do, that when the Government introduced their Work programme, they said that it would be the best ever employment service and that it was meant to help long-term unemployed people? Does she agree that that group does not seem to have received the necessary help?

Bridget Phillipson:
Like my hon. Friend, a lot of the correspondence I receive and what people who visit my surgery tell me is that the Work programme is not delivering. They are not getting the help they need from it and they are not getting back to work. In an area such as mine, where long-term unemployment and youth unemployment remain a major concern, it is simply scandalous that the Government are not taking the action necessary to get people back to work. These people are desperate to work and they want to work.

The situation is not a great deal better for those in work. They are struggling to make ends meet with the rising cost of child care, ever-increasing energy bills and falling wages. Parliamentary questions have revealed that, since 2010, men living and working in my area

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have suffered a 10% cut in real-terms pay—in other words, a cut of £49 a week. Women have seen a drop in their wages, too—they now receive £26 less a week.

I recently visited the Loaves and Fishes food and bank in Easington lane in my constituency. It opened last September and is one of many new food banks that have, unfortunately, opened in Sunderland. Of course, I pay tribute to the volunteers and local community who are coming together to take action. We have always been an area that comes together and responds to need. The compassion and drive of the volunteers is evident, but so too is their sadness—sadness that these food banks need to exist at all. I am proud of their dedicated service, but it is a source of immense regret that local people are increasingly being forced to turn to food banks to survive, including many people in work, as the volunteers told me.

One of the biggest barriers that parents—particularly mothers—face is accessing child care when returning to work. Affordable and accessible child care will support our economy to grow, allow parents to work and give many children the best start in life, particularly those from the most disadvantaged backgrounds. The Bill’s measures, however, will not even kick in until the next Parliament. They do nothing to help parents now. They also help fewer people than previously announced and come after £15 billion-worth of cuts to support for children and families.

When in government, we did much to address that problem. In fact, we were the first Government to accept that, rather than child care being a private family matter, the Government had a role to play in ensuring that places were available. We devoted particular attention to supporting single parents back to work, which was welcomed in my constituency and did much to encourage people back into work.

Just like then, we now also have clear plans to help parents with 25 hours a week free child care for working parents of three and four-year-olds. That will be of real help to parents, who need action now. It is disappointing that the Government measures offer no help to parents struggling to work and pay for child care.

In the north-east, we need a Government who work with us, recognising both the potential and the opportunities that exist, as well as the challenges we face. My constituents, like so many working people across the country, need a Government who are on their side, tackling the issues of falling wages, getting our young people back to work and taking action now to help parents struggling with child care costs.

Economic recovery must be sustained and balanced, benefiting all regions of the country with economic recovery for all, but this Bill simply does not do enough to address that.

3.28 pm

Richard Harrington (Watford) (Con):
Rather than try to compete with the shadow Chief Secretary’s negative attitude towards the Bill and his extended romp through it, I feel it is my role—my position is somewhat more humble than his—to stick to two or three brief points and ask the Government and him to think about them.

Although I applaud the Bill’s pension clauses, I think that two particular issues should be addressed in addition to what was said in the Budget statement. The first

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relates to the provision of advice and information to people who choose an alternative to the previous system whereby, for good and bad, the decision was handled by an insurance company through the annuity system. Something has been published about Government money being spent on helping to provide advice or information, but my fear is that that will turn out to be a call centre somewhere, with people who may be trained only in a limited way having to advise people on the biggest decision of their lives and finding it very difficult to do so.

Regulations were brought in by the Financial Services Authority for the smaller independent financial advisers who, for better or for worse, provided such a function for people retiring with small pension pots. A very open policy by Adair Turner and Hector Sants, part of the previous administration at the FSA, in the form of new regulations relating to the retail distribution review and the disclosure fees, has effectively eradicated the very low-level IFAs—those dealing with very small pension pots—simply because it was impossible for them to charge enough money to be able to give proper advice. I understand that, because it is just economics, but my fear is that no one or no company has adequately replaced that kind of advice, let alone in relation to what the Government are about to do.

I hope that the Exchequer Secretary and his colleagues will give that some attention. I know some money has been allocated, but for most people it is the most serious decision they will ever take, except possibly when buying a house. There must be a mechanism, whether private or Government-funded, to provide good advice. For wealthier people, there is a very sophisticated wealth management business—IFAs are very good, and I am sure that different firms around the country do an excellent job—but given that the average pension pot is probably about £20,000 to £25,000, it is a very important decision for people who have saved into it all their lives. A lot of thought must go into how such people are informed, although I accept that, for regulatory reasons, there is a big difference between information and advice.

Mark Field:
My hon. Friend makes a very important point that is worth stressing. In the midst of more and more regulation, standardisation and almost a utilisation of all facets of the financial services industry, we are moving away from the very personalised advice that the sort of clients to whom he refers so desperately require.

Richard Harrington:
I thank my hon. Friend, who characteristically makes a very good point. The problem is that to give the kind of detailed personalised advice that people want, the fee has to be at a certain level to reward professionals for doing the job, but smaller pension pots make that very difficult. That is nothing to do with regulation; it is simply about being able to charge the correct amount for their time. I hope that there will be alternative systems, although they may not perhaps give quite the bespoke advice that is available for people with larger pots. In other fields, such as accountancy, there are ways in which people can get good advice without having to spend the vast amounts of money available to those with larger pots.

My second point about changes in pensions legislation is just a thought. Many billions of pounds will become available that would have been dealt with directly in the insurance market through the annuity system. Have the

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Government given any thought to providing a facility involving national savings in which the Government or an organisation acting on their behalf deal with it on a managed fund basis? There is a similar system in Australia and New Zealand, where there is a kind of sovereign wealth fund that comes from people’s pensions pot, accrued together, with the necessary caveats about risk, a portfolio approach and all such matters. The Government thereby take advantage of the savings system, so that people can retire with a very good, solid and Government-guaranteed choice—of different types of products and risks—about what to do with their money. It would be very simple, with perhaps one or two choices; it obviously could not compete with the great panoply of schemes of the large fund management companies. It would be simple so that people could understand it, and I hope that it would provide a vehicle for funds that are safe and give a good return for the public, while also providing the Government with extra funds, as happens with National Savings & Investments.

On the Budget generally, which I support fully, my fear is that this country still lacks a business culture. Both this Government and the previous one quite rightly focused on small and medium-sized enterprises, businesses and apprenticeships, with different schemes and systems to try to help them. When I speak at schools in my constituency—as for all hon. Members, they are a regular feature in my diary—it is interesting to talk to young people about what they want in life, yet very few of the brighter ones seem to desire to go into a business environment. Those who do have such a desire tend to be interested in graduate schemes with larger multinational companies or the professions. There is nothing wrong with that—some of them, heaven forbid, want to be politicians—but these are the very people whose families often have small businesses in my constituency, and there are 1,600 businesses in Watford that employ between two and seven people. It seems to me that the establishment—schools, parents and everyone else—very much look for brighter young people to go into the professions and find alternatives to self-employment.

It is very hard to change that culture, but I want to commend the Government for what they have done to help small businesses and to help people to start up businesses. Wenta in Watford—the Exchequer Secretary may be familiar with it, because it is near his constituency —is an incubator for many start-up businesses. I saw several of them when I was there only a couple of weeks ago, including a small business started by James Morgenstern in which, in arrangement with Google, people who find an image of a building on Google Earth can then see a video of its interior. He started it in his bedroom and has now moved to an office at Wenta, and the business will expand.

To use James Morgenstern’s business as an example, his next big step is to have a first employee. I can speak with a little authority, because many years ago—I am probably about the same age as his parents or, depressingly, his grandparents—I was in that position. One starts a business and it is all great: one does everything oneself, being up 20 hours a day, and all that—it is a great pity that the shadow Chief Secretary is not in his seat at the moment, because he would be very interested in this, so perhaps I should brief him fully outside the Chamber—and the next step is to have a first employee.

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I am very pleased that the measures taken by this Government have helped somebody to take that step. There have been different schemes relating to national insurance, and in particular schemes that have made it very reasonable for small companies to take on apprentices, who are given a tailor-made programme. To get to employees Nos. 1, 2 and 3—after employing only oneself—is the biggest step for a small business. From the point of view of the economy, in reducing expenditure on welfare, while people benefit from earning money themselves and eventually pay tax, that step is most critical. Many of the measures in this Budget and in previous Budgets will help with that.

In the end, most people set up businesses for one reason. It may be a noble reason or a selfish reason, depending on one’s perspective, but people set up businesses to make money for themselves and their family. When I speak to students in my constituency, I always commend those who want to be teachers, social workers and doctors because when they graduate, they will give their lives to help other people in society. However, to those people who put their hands up and say that they want to become rich, live in a big house and get a Ferrari—there are a few of them—I say that, provided that they pay their taxes and employ people, they will benefit society just as much as the first group of people. I really believe that. I believe in everything that the Government have done in the Budget and in the Finance Bill to help people to do that.

The tax cut for millionaires is a mantra for the shadow Chief Secretary. I am sure he is having his cup of tea and saying the same thing to anyone around the table who cares to ask. However, I do not believe that what he says holds water, because we want people to become millionaires. I want my constituents to want to become millionaires. By the way, on the first million, they will pay about half a million in tax and will hopefully spend another 200 grand on the Ferrari. Can we please let people become millionaires? The Government should help people to generate wealth and a lot of tax to support the people in this country who really need help.

Mr John Redwood (Wokingham) (Con):
Are not people who set up businesses performing a public service in their own right? They are not just given a million pounds because they want a million pounds. They have to open a chemist shop and provide pharmaceuticals to people or whatever. Is that not as much of a public service as anything else?

Richard Harrington:
My right hon. Friend makes a valid point. That is another benefit. That is another way in which setting up a business is a public service.

Many of the things that the Government are doing involve not only the Treasury, but other Departments. I mentioned the pension changes, which relate to the Department for Work and Pensions. There are also changes in skills and education. The new university technical college in Watford completed on its property in Colonial way today. That has been put together by David Meller of the Meller Education Trust, who has several projects in the area, and myself. It will provide pre-apprenticeship education for businesses in the area that have jobs and that want trained people.

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The UTC is sponsored by the Hilton hotel group, which is based in Watford. In fact, it runs the world from Watford. Everyone in Watford thinks that they run the world from there, but Hilton actually does. For the sake of clarity, people should understand that that excludes the United States, the rest of the world being a region of the United States in many people’s perception. The important point is that such firms are thinking, “If we want skilled employees to build up our business, we need them to be trained from quite an early age.” Hilton and Twin Technology, which is an IT company, are the two main sponsors of the UTC. They helping to design the courses because they are prepared to guarantee that there will be work experience and apprenticeships for people who come through the college. The Government have helped to facilitate that through the Budget and the Finance Bill.

In the dream world of the Opposition, they say, “Hey, everybody should get a job and it is guaranteed for a year.” No one has explained to me where those jobs will come from. I saw people working in the park as a result of the last Government’s attempt at that. People were taken on for a year to help the park keeper, but the job disappeared because it was not really a job. I am pleased that this Government have done their best to avoid that trap.

Stephen Doughty:
The hon. Gentleman is giving a slightly confusing impression of such schemes. I have met small businesses in my constituency that have benefited from taking on workers through the Jobs Growth Wales scheme, which they would not otherwise have done. The scheme therefore benefits the business and the person who is in a job, getting experience and developing themselves. There would otherwise have been a lost opportunity.

Richard Harrington:
I respect the hon. Gentleman’s view. I described my experience of the last scheme and he has spoken of his personal experience. I am in favour of that kind of scheme. When I was very young and starting out in business, I was able to take on one person under the old youth training scheme, which was much maligned by the Labour Government afterwards. I paid her £30 a week and the Government made up the balance. It was a very simple scheme and not as sophisticated as the schemes that we have today. That person is still in employment, although I am no longer anything to do with the company. She was 17 at the time and is now 40. That shows how old I am, but it also shows that such schemes can work for people. In my experience, the jobs that were provided under the last scheme would not otherwise have existed. It did not subsidise a job that would have been there anyway. However, I am perfectly happy to accept his point and his experience.

Mr Kevan Jones:
I do not think that the hon. Gentleman has looked very closely at what we did in government. The scheme that my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) referred to is more akin to the scheme that the last Labour Government had. The alternative is that people are sat at home doing nothing. I agree with the hon. Gentleman that if people do not get a work ethic early on, but have two or three years sat on the dole, it is even harder for them ever to get into work.

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Richard Harrington:
The hon. Gentleman is absolutely right. There is a consensus that it is not acceptable if people who are on jobseeker’s allowance do not have to do anything towards getting a job. We can deal with that either by the Government providing a job through a direct subsidy, as the Opposition suggest, or through the current system.

Mr Jones:
Will the hon. Gentleman give way?

Richard Harrington:
If the hon. Gentleman will bear with me, I will make a bit of progress first.

The system means that people are effectively signing an employment contract when they sign on—I have seen such contracts, and the purpose is to get people looking for work. It is a programme of looking for work and taking up initiatives that have been derided by the Opposition, such as the work experience programme, the Work programme and other things. But I have seen the system work. It provides a lot of jobs in my constituency. However, the principle of what the hon. Gentleman says, which is that people should not be allowed to rot and do nothing while on jobseeker’s allowance, is right.

The hon. Member for Houghton and Sunderland South (Bridget Phillipson) made a good point that was pertinent to her constituency, and she has met people who have applied for hundreds of jobs and been unsuccessful. I accept that and have heard of similar cases. I cannot compare my constituency with that of my hon. Friend the Member for Cities of London and Westminster (Mark Field), or with Kensington and Chelsea, but in Watford—as the shadow Chief Secretary to the Treasury, who is not here, would know as he is a frequent visitor, for which I am grateful—jobs are available. I am not saying there are jobs everywhere, and it is difficult for anyone to get a job, but I accept that in the hon. Lady’s constituency things are completely different.

Sheila Gilmore:
Is the hon. Gentleman concerned that the number of unemployed people remains relentlessly high, despite the talk about there being lots of jobs? Surely we must try to address that because 2.3 million people are still unemployed. That is a serious situation for all those people.

Richard Harrington:
I agree with the hon. Lady, but in my constituency the number of those on jobseeker’s allowance has come down from about 3,600 to, I think, 1,700. I have met a lot of those 1,700 people and chatted to them.

Sheila Gilmore:
Over the past couple of years in particular the number of people on jobseeker’s allowance has dropped, but the number of unemployed people has not. Only 58% of those who are unemployed are now in receipt of jobseeker’s allowance. The two figures are considerably out of synch.

Richard Harrington:
I spend a lot of time at Jobcentre Plus—if the hon. Lady and her colleagues have their way, I am sure I will be spending a lot more time there after May next year—but I do that for a serious reason, which is to talk to people on jobseeker’s allowance. I have heard the Opposition speak about these matters, and one cannot argue with the Office for National Statistics and statistics such as that. However, I wanted

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to try to get to the bottom of the issue and—I am genuinely not trying to make a party-political point—that has not been my experience in my constituency.

Bridget Phillipson rose—

Richard Harrington:
If the hon. Lady will excuse me, I have taken enough of Madam Deputy Speaker’s time.

I conclude by referring again to the shadow Chief Secretary to the Treasury, who is not here. He painted a picture of the problem with millionaires getting pay rises and everybody else being increasingly impoverished. Next time he is in my constituency—as I said, he is a regular visitor to Watford—I would very much like to meet him and show him around because real unemployment has halved. Youth unemployment has dropped to pre-recession levels and is falling, and more than 400 new businesses have opened in the past year. I would like him to come with me to Watford high street and meet Alex and Isabella, whom I met last week. They have just opened an independent coffee shop there. Neither of them has any experience in business, but they are operating on the high street, along with other businesses. Those businesses are real, those jobs are real, and with the Budget and the Finance Bill I believe the Government have done everything possible to help the economy so that the experience of Watford high street becomes not the exception but the reality for many people.

3.49 pm

Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op):
I listened with care and interest to the hon. Member for Watford (Richard Harrington), and I challenge the idea sometimes portrayed by Conservative Members that the Labour party is somehow against business and does not understand it or the value it creates for the economy. We all do. I meet many small and large businesses in my community every week. Of course I want to see them grow and employ more people. I want them to employ people on better wages with better conditions and add that value. The hon. Gentleman’s comments about people being able to buy Ferraris are revealing and go to the heart of the Government’s problem, which is that they have done so much to help big businesses and bigger earners but done so little—or indeed have targeted—those who have less, be they small businesses or individuals on low incomes. That is the fundamental difference between those on the Government Benches and those on the Opposition Benches.

I am delighted to have the opportunity to speak on the Finance Bill and to support the reasoned amendment. As my hon. Friend the Member for Nottingham East (Chris Leslie) made clear, the Bill is long and weighty but will do remarkably little, if anything, to tackle the cost of living crisis facing many of my constituents. It will do much to support bigger earners and bigger businesses at the expense of small and medium-sized enterprises and businesses, and small and medium income earners in constituencies such as mine. It will do very little for the bank clerk or the call centre operator working for the banks and the financial industry in my constituency. It will do very little for the cleaner taking on a second or third job to make ends meet to be able to pay basic bills. The basic costs of living, whether energy,

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food or heating, are rising for them. It will do very little for the shift workers working in supermarkets in my constituency.

Jacob Rees-Mogg:
This is a completely different Finance Bill from the one we have before us. The only decile of income that will actually be worse off in the next year is the top decile. In this Budget, there is £15 off fuel bills, a rise to £10,500 in the personal allowance, which helps the lowest paid most of all, and the freeze in fuel duty. All that helps the worst-off in society.

Stephen Doughty:
The hon. Gentleman fails to note that the average worker has become £1,600 worse off since his Government came to power. I am sure that he is doing relatively well, but many people in his constituency, and certainly in mine, are not. Small businesses in my constituency are struggling with energy bills and business rates.

Hard-working people across my constituency are £1,600 worse off since the Government came to power. The increase in the personal allowance is often paraded by Government Members, but that is dwarfed by the 24 tax rises that have hit hard-working people. At the same time, the Chancellor has given a tax cut to millionaires. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) is not in his place, but he spoke on that earlier. The economic adviser to the leader of Plaid Cymru has apparently also supported that recently.

Mr Kevan Jones:
Does my hon. Friend agree that there is the problem of insecurity, even for those who are in employment? Zero-hours contracts and a lot more part-time work make it difficult for many people to get credit, or even to dream of getting on the housing ladder.

Stephen Doughty:
My hon. Friend makes an excellent point. Indeed, I will come on to the value of high-paid and well-paid work later in my remarks. That is one of the reasons I am such a strong supporter of the living wage. I am not surprised that Government Members will not give us an answer, when asked about the job figures, on how many of them are part-time, zero-hours contracts and minimum wage jobs. That is deeply revealing.

Businesses across my constituency are still struggling to get competitive financing to grow, yet bank bonuses are rising again. The Chancellor is using his time in Europe to fight on the bankers’ behalf, rather than looking at how we regulate our banks and financial sector in a sustainable and fair way that will drive real investment and real jobs in our economy.

What affect businesses in my constituency just as strongly, and 2.4 million businesses across the country, are energy price rises. They have hit the cafes I visit in Grangetown as much as they have hit the hard-working nurse or police officer who is struggling to pay their energy bills in places such as St Mellons and Penarth in my constituency. Energy bills have risen by £300 a year since the election. The Government constantly try to con us into believing that they are cutting bills, but the bills continue to rise. The Government remain unwilling to agree to an energy price freeze, although this week one of the major energy companies agreed to freeze its prices.

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Earlier, my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson) spoke passionately about visiting food banks in her constituency. I meet people who are struggling to get by: people who have been in work and have been looking for work, but who are now experiencing the indignity of having to go to food banks for emergency help.

Mark Tami (Alyn and Deeside) (Lab):
Many people who are in work have to go to food banks as well, because they are receiving very poor wages or are on very poor zero-hours contracts.

Stephen Doughty:
My hon. Friend is exactly right. I have met many such individuals in my constituency. Two of the main food banks in my constituency are Cardiff Foodbank and the Tabernacle food bank, which is run independently by a church in Penarth. During the festive period in the run-up to last Christmas, demand for the Tabernacle’s services was eight times higher than it had been over the previous festive period, and demand in Cardiff overall doubled. I found that information very revealing. If it does not give an impression of what is really going on—of the hardship that people are facing, and the number of people who are on the edge as a result of the cost of living crisis—I do not know what else does.

Mr Redwood:
Since devolution and the advent of a Labour Government in Wales, there has been more public spending per head in Wales than in London and the south-east, yet the economy of London and the south-east has greatly outgrown that of Wales. Why should that be?

Stephen Doughty:
I am interested that the former Secretary of State for Wales should want to make comparisons between the economic performance of Wales and that of the rest of the United Kingdom. As I said earlier, the Jobs Growth Wales scheme has secured work for 12,000 people who would not otherwise have obtained it. In fact, Welsh unemployment is now lower than unemployment elsewhere in the UK. I think that the Welsh Labour Government are doing a very good job, notwithstanding the constant war on Wales being waged by the Conservatives, which the right hon. Gentleman appears to want to continue.

What I have described is the reality of life in Britain today for the constituents I have met at food banks, because of the cost of living crisis. We want the Government to take the steps we have recommended. We would like to see a Finance Bill that froze energy bills, reformed the broken market, returned people to work—not just in Wales, but throughout the UK—with a compulsory jobs guarantee, cut taxes for 24 million people on middle and low incomes by introducing a 10p rate, and cut business rates for small firms rather than cutting corporation tax for the biggest. A moment ago, we were talking about the Welsh Labour Government. It was only yesterday that their Economy Minister announced a new business rates relief scheme for retail companies. That is another example of the way in which they are prioritising small businesses, whereas this Government are prioritising those at the top. Of course, we would also reverse the £3 billion tax cut for people earning more than £150,000 a year.